State Farm Fire and Cas. Co. v. Fincher

Citations: 454 So. 2d 936; 1984 Ala. LEXIS 4237Docket: 82-603

Court: Supreme Court of Alabama; June 8, 1984; Alabama; State Supreme Court

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In the case of State Farm Fire and Casualty Company, Inc. and Steve Templeton v. Ronald R. Fincher, the Supreme Court of Alabama addressed an appeal following a jury verdict awarding $100,000 for fraud to the plaintiff, Ronald R. Fincher, who had filed suit against his insurance provider and its adjuster. The plaintiff's complaint detailed two counts: 

1. **Breach of Contract**: Fincher alleged that State Farm issued a homeowners insurance policy that covered fire damage. Following a fire that destroyed his home on October 2, 1981, Fincher claimed the company refused to pay the full benefits he was entitled to, despite fulfilling all policy conditions. He sought $5 million in damages for the loss of property, loss of use, and emotional distress.

2. **Fraud**: Fincher contended that during the policy negotiation on April 18, 1980, State Farm, through its agents, made false representations regarding the insurance coverage. He asserted that the company either knew these statements were false or acted with reckless disregard for the truth, leading him to rely on those misrepresentations. He became aware of the fraud within one year before filing his complaint.

The defendants raised multiple issues on appeal, notably questioning the specificity of the fraud pleadings, which were central to their arguments for dismissal and directed verdict. The trial court upheld the jury's verdict and denied the defendants' post-trial motions.

Plaintiff seeks a total of $5,000,000 in compensatory and punitive damages against defendant State Farm Fire and Casualty Company for failing to fulfill promises made regarding fire damage coverage. The defendant allegedly made both written and oral assurances to pay for potential losses to the plaintiff's home, intending to induce reliance while secretly planning not to honor those promises. The plaintiff, unaware of the defendant's intentions, relied on these promises and paid premiums until realizing the defendant's refusal to perform after his house was damaged by fire within the last year.

In COUNT FOUR, the plaintiff claims the defendants breached their duty of good faith and fair dealing by failing to pay valid claims, withholding payments, and not adequately assessing the validity of the plaintiff's claims. As a result, the plaintiff suffered damages related to the loss of his dwelling, personal property, and emotional distress since October 2, 1981. The defendants' actions are characterized as oppressive and malicious, justifying punitive damages.

COUNT FIVE establishes a fiduciary relationship arising from the insurance policy, which the plaintiff relied upon for security against property loss. The defendants are accused of breaching this duty through the same wrongful acts as noted in COUNT FOUR. Consequently, the plaintiff has suffered emotional distress and loss of use of the insured property. The plaintiff demands the same $5,000,000 in damages, along with interest, court costs, and attorney's fees.

Plaintiff seeks judgment against defendants for $5 million in compensatory and punitive damages, along with interest, court costs, and attorney's fees. The allegations, outlined in Count Six, assert that on April 18, 1980, State Farm Fire and Casualty Company, through its agents, failed to disclose critical policy information regarding total loss payments in a fire insurance policy. The plaintiff, unaware of this omission, signed the insurance application and made payments. The plaintiff learned of the fraudulent concealment within one year of filing the complaint, following a fire incident on October 2, 1981. 

Defendants filed a motion to dismiss the complaint, citing vagueness and a lack of clarity regarding their required defenses, which the court did not initially rule on. Discovery proceeded, and a pre-trial conference was scheduled for October 5, 1982. Defendants later submitted an amended motion to dismiss and separate motions for summary judgment, claiming specific defenses against the individual defendants Steve Templeton and Jim McCain, asserting they had no direct contact with the plaintiff regarding the insurance application. Additionally, they contended that the plaintiff's claims were inconsistent, seeking both fraud and breach of contract remedies in the same action. 

Trial commenced on November 3, 1982, during which the court struck Counts IV and V and added First Federal Savings and Loan Association as a party plaintiff in Count I.

The case proceeded to trial on several counts: breach of contract, fraud in the inception, and fraudulent concealment by the selling agent, with no claims of fraud during the claim adjustment phase. Count four, alleging bad faith due to the defendants withholding valid payments, was dismissed prior to trial, leaving no allegations of post-fire misrepresentations. Defendants believed the fraud claims only pertained to inception and were unprepared to address any fraud claims related to the claim adjustment. At the close of the plaintiff's evidence, the plaintiff's counsel sought to amend the complaint to specify three instances of alleged fraud by State Farm’s agents, Doug Camp and Steve Templeton, regarding the policy's terms and conditions. These included misrepresentations about payment amounts without depreciation, the necessity to rebuild in the same location to recover the full policy amount, and false statements regarding the coverage of additional expenses. The defendants objected to this late amendment, citing the requirement for specificity in fraud allegations as outlined in Rule 9(b) of the Alabama Rules of Civil Procedure, asserting that such details should be provided before trial commencement. The court found the objection valid.

The Court referenced a committee comment to Rule 9(b), indicating that pleadings must specify the time, place, content of false representations, the fact misrepresented, and what was obtained. In the case Robinson v. Allstate Insurance Co., the Court criticized the lack of identification of the agent who made the alleged misrepresentation. The original complaint against State Farm was deemed insufficient to survive a motion to dismiss, particularly regarding fraud claims post-fire and against individuals Templeton and McCain, who were not part of the contract. Although Rule 15(b) permits amendments to align with evidence when issues are tried by consent, State Farm did not consent to the post-fire fraud issues. Evidence relating to Templeton’s settlement efforts was admissible for the breach of contract claim, as defendants had no prior notice of Fincher’s intent to pursue fraud claims. After the plaintiffs rested and following motions for directed verdicts, the court dismissed the breach of contract claim against Templeton and McCain, and the fraud claim against McCain due to lack of evidence. However, the court denied State Farm's motions regarding the directed verdicts and the requirement for the plaintiff to elect between claims. The jury rendered a $100,000 verdict for fraud against State Farm and Templeton, which the trial court upheld despite the defendants' objections regarding the amendment that introduced new fraud theories. The Court found that allowing the amendment was erroneous due to the lack of notice to the defendants, leading to a substantial verdict against them. Consequently, the trial court's judgment was reversed and the case remanded.